US markets closed lower on likely rate hike and Greek drama

05 Jun 2015 Evaluate

The US markets closed lower on Thursday, on fresh Greek drama and US economic reports that helped make an interest-rate hike this year look more likely. In the latest twist in Greece’s ongoing crisis, the debt-laden country told the International Monetary Fund (IMF) that it plans on bundling four loan repayments due in June, with the first due Friday, into one payment for June 30. Meanwhile, the IMF has called on the US central bank to postpone its planned interest rate increase until 2016, pointing at the degree of slack in the economy and uncertain inflation prospects. The IMF in its report noted that the underpinnings for continued growth and job creation in the world’s largest economy remain in place. In recent months, however, momentum had been sapped by a series of negative shocks, the lender of last resort added, which included a harsh winter and a strong dollar that hurt US exports. The IMF also added that it was cutting its annual growth outlook for the US economy to 2.4 percent, from its April forecast of 3.1 percent, due to the unexpected first-quarter downturn.

On the economy front, the number of people seeking unemployment benefits at the end of May remained near a 15-year low, reflecting steady improvement in the labor market amid a flood in hiring over the past 1 1/2 years. Some 276,000 Americans filed initial jobless claims in the period running from May 24 to May 30, a week that included the Memorial Day holiday. That was down 8,000 from the prior week. The average of new claims over the past month edged up 2,750 and stood at 274,750. The four-week average smooths out sharp fluctuations in the more volatile weekly report and is seen as a more accurate predictor of labor-market trends. Both jobless claims numbers are still hovering near levels last seen in 2000, reflecting the small number of layoffs taking place in the economy each week.

Meanwhile, US productivity in the first quarter fell by a revised 3.1% annual pace instead of 1.9%. Gross domestic product was recently cut to show a 0.7% decline in the first quarter instead of a 0.2% gain. The increase in hours worked in the first quarter was trimmed to 1.6% from 1.7%. The bigger drop came in output of goods and services, which fell a revised 1.6% instead of 0.2%. Unit-labor costs rose at a 6.7% annual rate instead of 5%, but the year-over-year increase was still muted at just 1.8%. Hourly compensation for all workers rose 3.3% in the first quarter, and an even stronger 6.5% adjusted for inflation.

The Dow Jones Industrial Average lost 170.69 points or 0.94 percent to 17,905.58, Nasdaq was down by 40.10 points or 0.79 percent to 5,059.13 while, S&P 500 was lower by 18.23 points or 0.86 percent to 2,095.84.

The Indian ADRs closed mostly in red on Thursday; Tata Motors was down by 0.70%, Infosys was down by 0.45%, HDFC Bank was down 0.20% and Dr. Reddy’s Lab was down 0.05%. On the other hand, Wipro was up 0.13%.

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